Extremes – Overbought Readings – Dec 30, 2020

In this edition of extremes I am seeing in the market, it’s no surprise that its dominated by securities and assets which are Overbought, such as;

Soybeans & Corn (up 50% in 5 months)
Lumber, again. (following a scorching 243% rise between Apr-Aug then followed by a 47% fall, it seen a new 81% advance over the past 2 months)
Copper (soared 70% over 8 mths)
Tin (rose 33% in 7 months)
Iron Ore (added 88% in 8 months)

While the CRB (commodity) Index and Brent Crude are yet to trade into Overbought territory, the former has risen 62% from its April lows, while the latter has produced a stunning 220% return from its $16 April lows and also has a notable weighting in the index.

Incidentally, Gold (in USD) has risen 27% over 9 months.

While I call a new commodity bull cycle, beware that the absolute time to “buy straw hats in winter”, isn’t today.

This is list is meant to tell you that the probability of going long at this moment isn’t ideal.

New buyers will need to wait.

In currency land, those Overbought versus the USD are;
NZD, CNH, KRW, SEK & SGD.

(n.b. the last time the NZD was this overbought was July 2011)

Amongst equity indices, members of the Overbought club are;
the Bovespa (up 28%), the Kospi (+ 24%), the Nikkei 225 (+19%) and the Russell 2000 has soared 27% (and has been overbought for 3 weeks).

Note: that the Nasdaq and &P 500 haven’t touched Overbought levels yet.

Reference closing prices:

Soybeans 13.11, Corn 4.84, Lumber 873, Copper 3.52, Tin 20,580, Iron Ore 158.00, CRB Index 167.80, Brent 51.70, Bovespa 119,017, Kospi 2,873, Nikkei 27,444, Russell 1,975.

(versus USD) NZD 0.7182, CNH 6.50, KRW 1,086, SEK 8.23, SGD 0.7565

December 30, 2020
by Rob Zdravevski
rob@karriasset.com.au